[Federal Register Volume 62, Number 203 (Tuesday, October 21, 1997)]
[Proposed Rules]
[Pages 54747-54748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27829]
Federal Register / Vol. 62, No. 203 / Tuesday, October 21, 1997 /
Proposed Rules
[[Page 54747]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 8
[Docket No. 97-20]
RIN 1557-AB60
Assessment of Fees; National Banks; District of Columbia Banks
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of the Comptroller of the Currency (OCC), in order
to more accurately reflect the OCC's costs of supervising banks, is
proposing to amend its assessment regulation to impose a surcharge on
banks that receive a rating of 3, 4, or 5 under the Uniform Financial
Institutions Rating System (UFIRS) (also referred to as the CAMELS
rating) and on Federal branches and agencies of foreign banks that
receive a rating of 3, 4, or 5 under the ROCA rating system (which
rates risk management, operational controls, compliance, and asset
quality). This amendment will enable the OCC to distribute more
equitably the costs it incurs when supervising institutions that are
experiencing significant problems. The OCC also is soliciting comments
on the appropriate method of computing assessments for those banks that
own other banks.
DATES: Comments must be received by November 20, 1997.
ADDRESSES: Comments should be directed to, and may be inspected and
copied at: Communications Division, OCC, 250 E Street, SW., Washington,
D.C. 20219, Attention: Docket No. 97-20. In addition, comments may be
sent via FAX, at (202) 874-5274, or via Internet at
regs.comments@occ.treas.gov.
FOR FURTHER INFORMATION CONTACT: Roy Madsen, Deputy Chief Financial
Officer, Financial Review, Policy and Analysis, (202) 874-5130; or Mark
Tenhundfeld, Assistant Director, Legislative and Regulatory Activities
Division, (202) 874-5090.
SUPPLEMENTARY INFORMATION:
Background
The OCC charters, regulates, and supervises approximately 2,700
national banks and 64 Federal branches and agencies of foreign banks in
the United States, accounting for nearly 60 percent of the nation's
banking assets. Its mission is to ensure a safe, sound, and competitive
National Banking System that supports the citizens, communities, and
economy of the United States. The OCC funds the activities that further
this mission by imposing assessments, fees, and other charges on banks
within its jurisdiction, as necessary and appropriate to meet the OCC's
expenses, pursuant to 12 U.S.C. 482.
The OCC charges each national bank and Federal branch and agency a
semiannual assessment according to a formula that is described in 12
CFR 8.2. In general, the OCC calculates the semiannual assessment by
using a marginal rate that declines as an institution's asset size
grows. The OCC also reduces assessments charged to a ``non-lead bank''
(which, generally speaking, refers to a national bank that is not the
largest national bank owned by the same company 1) by a
percentage determined in accordance with each assessment. For example,
the OCC reduced the assessment for non-lead national banks that was due
January 31, 1997, by 12 percent.2
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\1\ In a final rule published elsewhere in this issue of the
Federal Register, the OCC has amended the definition of ``non-lead
bank'' to include a national bank that is not the largest national
bank controlled by a company (as opposed to a bank holding company).
\2\ The OCC made this reduction pursuant to an interim rule
published on December 2, 1996 (61 FR 64000). In the final rule
referred to in footnote 1 of this document, the OCC is adopting the
changes set forth in that interim rule. The final rule also adopts
the changes set forth in an interim rule published in 1994 (59 FR
59640) concerning fees for examinations of fiduciary activities,
special examinations and investigations, examinations of affiliates,
and examinations and investigations of corporate activities.
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The marginal rate structure (which applies a declining marginal
rate as bank asset size grows) and the assessment reduction for non-
lead national banks reflect the OCC's cost savings resulting from the
economies of scale realized in the examination and supervision of large
institutions and non-lead banks. However, the current assessment
regulation does not reflect the increased costs that the OCC incurs
when supervising a bank whose condition requires special attention. As
a result, healthy banks subsidize banks that are experiencing
significant problems. The proposed imposition of a surcharge on banks
requiring additional OCC resources, discussed in the section that
follows, addresses this concern.
Discussion of the Proposal and Request for Comment
Surcharge
The proposal adds new paragraphs (a)(7) and (b)(5) to
Sec. 8.2,3 which provide that the OCC will impose a
surcharge equal to 25 percent of the amount of the assessment that
otherwise would be due from (a) national banks that receive a UFIRS
rating (also referred to as a CAMELS rating 4) of 3, 4, or 5
and (b) Federal branches and agencies of foreign banks that receive a
ROCA rating of 3, 4, or 5. OCC cost data show that there is a
significant increase in supervision costs once an institution's rating
moves from 2 to 3 and that these increased costs continue while the
bank is rated 3, 4, or 5. To reflect this increase in costs of
supervising a bank rated 3 or worse, the proposal uses a UFIRS or ROCA
rating (as appropriate) of 3 as the threshold for applying the
surcharge. Using the most recently available data at the time this
proposed rule was prepared, the surcharge would affect a total of
approximately 85 national banks and Federal branches and agencies of
foreign banks, resulting in an aggregate annual increase in assessments
for these banks of approximately $0.7 million.
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\3\ In the final rule referred to in footnote 1, the OCC added a
new paragraph (b)(4) to Sec. 8.2.
\4\ CAMELS is an acronym that stands for capital, assets,
management, earnings, liquidity, and sensitivity to market risk.
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By linking assessments with the condition of the banks supervised,
the proposal ensures that a greater proportion of increased OCC costs
attributable to banks whose condition requires additional supervisory
resources is funded by those banks rather than by the national banking
system as a whole. If more banks were rated 3, 4, or 5, the OCC would
need additional and/or more specialized staff to monitor the efforts of
those banks to improve their condition. The proposal expands or
contracts assessment revenue automatically in a way that responds to
the changing demands on the OCC.
The OCC considered the alternative of imposing a 50-percent
surcharge on banks that are rated 4 or 5.5 However, a 50-
percent surcharge on UFIRS or ROCA 4-and 5-rated institutions would not
cover the increased costs of supervising all institutions rated 3, 4,
or 5. As a result, institutions rated 3 would be subsidized both by
healthier banks (who would, under the alternative approach, be paying
assessments at the same rate as 3-rated institutions even though the
healthier banks require less supervision) and by banks in worse
condition (who would be paying the assessment surcharge).
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\5\ This is the approach taken by the Office of Thrift
Supervision in assessing savings institutions. See 12 CFR 502.1.
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The OCC seeks comment on the approach set out in proposed
paragraphs (a)(7) and (b)(5) of Sec. 8.2. The OCC also seeks comment on
whether the ROCA rating is the appropriate
[[Page 54748]]
rating to use in imposing an assessment surcharge on Federal branches
and agencies, and, if not, whether some other rating or set of criteria
would be more appropriate.
Assessments of a Bank That Owns Another Bank
An issue has arisen concerning the proper method of calculating the
assessments of national banks that own other banks. This issue stems
from a recent change in the Call Report instructions 6
pursuant to which the assets of a subsidiary bank are reported on a
consolidated basis in the Call Report of its parent bank. Given that
the subsidiary bank also is required to file a Call Report, the current
assessment regulation, which bases assessments on assets reported in a
bank's Call Report, has the unintended effect of double-counting at
least some of the assets of the subsidiary bank.
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\6\ See 62 FR 8078 (February 21, 1997).
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The OCC seeks comment on methods that commenters believe would be
appropriate for calculating, for assessment purposes, the assets of a
national bank that owns another bank.
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA)
(5 U.S.C. 605(b)), the regulatory flexibility analysis otherwise
required under section 603 of the RFA (5 U.S.C. 603) is not required if
the agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities and the agency
publishes that certification and a short, explanatory statement in the
Federal Register along with its notice of proposed rulemaking.
Pursuant to section 605(b) of the RFA, the OCC hereby certifies
that this proposal will not have a significant economic impact on a
substantial number of small entities. The proposed rule does not impose
any new reporting or recordkeeping requirement. While the proposal
would require national banks, Federal branches, and Federal agencies of
all sizes that receive a UFIRS or ROCA rating of 3, 4, or 5 to pay an
assessment surcharge, this will not create a significant or disparate
impact on small institutions. The assessments for the 58 national
banks, Federal branches, and Federal agencies with total assets of
under $100 million that currently are rated 3, 4, or 5 would increase,
in the aggregate, by approximately $287,204 per year, or approximately
$4,952 per institution. Accordingly, a regulatory flexibility analysis
under 603 of the RFA is not required.
Executive Order 12866
The OCC has determined that this proposal is not a significant
regulatory action under Executive Order 12866.
Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency
prepare a budgetary impact statement before promulgating any rule
likely to result in a Federal mandate that may result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year. If a
budgetary impact statement is required, section 205 of the Unfunded
Mandates Act also requires an agency to identify and consider a
reasonable number of regulatory alternatives before promulgating a
rule. The OCC has determined that the proposed rule will not result in
expenditures by State, local, and tribal governments, or by the private
sector, of $100 million or more in any one year. Accordingly, the OCC
has not prepared a budgetary impact statement or specifically addressed
any regulatory alternatives. As discussed in the preamble, the
proposal, while increasing the annual assessments for institutions
receiving a UFIRS or ROCA rating of 3, 4, or 5, will, in the current
banking environment, increase assessments in the aggregate only by
approximately $0.7 million.
List of Subjects in 12 CFR Part 8
Assessments, Fees, National banks.
Authority and Issuance
For the reasons set forth in the preamble, part 8 of chapter I of
title 12 of the Code of Federal Regulations is proposed to be amended
as follows:
PART 8--ASSESSMENT OF FEES; NATIONAL BANKS; DISTRICT OF COLUMBIA
BANKS
1. The authority citation for part 8 continues to read as follows:
Authority: 12 U.S.C. 93a, 481, 482, 3102, and 3108; 15 U.S.C.
78c and 78l; and 26 D.C. Code 102.
2. Section 8.2 is amended by adding new paragraphs (a)(7) and
(b)(5) to read as follows:
Sec. 8.2 Semiannual assessment.
(a) * * *
(7) The OCC shall adjust the semiannual assessment computed in
accordance with paragraphs (a)(1) through (a)(6) of this section by
multiplying that figure by 1.25 for each bank that receives a rating of
3, 4, or 5 under the Uniform Financial Institutions Rating System at
its most recent examination.
(b) * * *
(5) The OCC shall adjust the semiannual assessment computed in
accordance with paragraphs (b)(1) through (b)(4) of this section by
multiplying that figure by 1.25 for each Federal branch or Federal
agency that receives a ROCA rating (which rates risk management,
operational controls, compliance, and asset quality) of 3, 4, or 5 at
its most recent examination.
Dated: October 15, 1997.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 97-27829 Filed 10-20-97; 8:45 am]
BILLING CODE 4810-33-P
